Music Law

05/08/2013

Graduation season is
here, and Jeff and I would like to send out big congratulations to law clerks Katherine West,
Will Dugoni and Ben
Shaw. Enjoy the ceremony, the party and the short
break…and then get ready to start studying for the Bar
Exam.

A couple
notes on this month’s podcast, which can be found below, and my conversation
with Rebecca Brian the COO at NextSpace.
Our legal discussion had to do with business entities, but we failed to
mention the newest form of business entity the Benefit Corporation. Why is this
important to note? Well, NextSpace just
became a certified B-Corp, which is a Benefit Corporation that
meets the B-Corp standards. Benefit Corporations are different from standard
Corporations in that they are formed for a purpose that may or may not place
the interests of the shareholders first.
For more info on Benefit Corporations and B-Corps check out our Benefit Corporation FAQ, and a hearty congrats to NextSpace
on becoming a certified B-Corp.

During the
conversation we make reference to the movie “The Lost Boys (1986)” which was filmed on-location in
Santa Cruz, CA. I couldn’t remember the
stand in name used in place on Santa Cruz in the Vampire drama starring “The Coreys”
(Feldman and Haim) and Kiefer Sutherland.
Of course, Santa Carla is the answer.

For those
of you who’ve already listened to the podcast, below is a picture of Rebecca
donning the infamous orange NextSpace wig.
If you haven’t listened yet, this picture shall serve as a preview of
the fun to be heard.

The
British are Coming! Yes, the Rolling
Stones are on tour in
celebration of their 50th anniversary. There has been a lot of talk about the ticket
prices for the “50 & Counting….” tour, which have an average price of over
$500 for the two Bay Area shows. Many
long-time fans are priced out of this go around. Generally, speaking, ticket prices have gone
up dramatically in the last decade. There
are a number of factors contributing to the rise in ticket prices for concerts,
including the “360” Deal.

Traditionally,
a record company received income off the sale of master recordings by bands that
it had under contract (see, owned). The record company would pocket 80% of
the profits from the sale of an album giving 20% to the band or artist. Things
like touring, merchandise and publishing were usually not part the recording
contract. However, once digital downloads hit the scene income from album sales
dropped dramatically. Record companies
seeking to find profits where they could, started offering artists and bands
“360” deals, meaning the record company got a financial piece of all activities
in the entertainment industry.

While it
may be the case that the Stones are simply big enough to command $500 ticket
prices, the general increase we’ve seen in prices is partly due to the fact
that bands and artist now have to share touring income with their record company. If you want to find out more about recording
contracts I’ll be speaking on the topic at this year’s California
Music Industry Summit,
happening the weekend of June 15th and Laney College in Oakland.

Finally,
an interesting ruling came down in the 9th Circuit last month
involving the Jersey Boys.
As part of the hit musical a clip form the old the Ed
Sullivan Show was
shown in connection with a segment showing the Four Seasons battling the
British Invasion of the late 60s (another Stones reference?). The owners of the
rights to the Sullivan Show sued the Jersey Boys producer for copyright
infringement. The producer countered
with a fair use argument based on commentary and criticism (for more on fair
use check out this podcast episode). The 9th Circuit ruled
that the use was, indeed, fair use as far as the stage play, but warned that
the use might infringe should it ever be used in connection with a recorded (TV
or Film) version of the Jersey Boys.
Interesting, at least for all us copyright lawyers.

Until next
month…

You understand and agree that use of this blog does not in any way create or establish an attorney-client relationship between you and any ARC Law Group attorney. You should recognize that the information provided on this blog is provided for your general information and should not be relied on as legal advice and is not a substitute for direct consultation with an attorney about a specific legal problem.

02/11/2013

Late last month I had the
privilege of moderating a panel on Music Licensing at this year's California Lawyers for the Arts,
Music Business Seminar. This is my fifth time speaking at the annual
event, and each year has been better than the last. I want to thank my
esteemed panelists Erik Metzger from Intel, Brooke Wentz from
the The Rights Workshop and
Keith Cooper from de la Pena & Holiday, LLP. We had a lively discussion and
it was great having Brooke on the panel to offset us lawyers. Brooke and
The Rights Workshop do wonderful work finding music to place in movies,
television programs and other licensing avenues.

California
Lawyers for the Arts: MBS 2013

An issue that seems to come up a
lot, both when speaking at events and in general practice, is music
copyright. It can be a confusing topic, because there are two separate
and distinct copyrights associated with creating music. There are
also a number of distinct revenue streams specific to each copyright. On
this month's B.E.S.T. Law Podcast we
spend some time breaking down the two music copyrights and explaining how they
work. If this is an area of interest to you, it's worth a listen.

When it comes to musicians, Law Clerk Ben Shaw loves him some Duane Allman, The Beatles and First Aid Kit.
Duane must have inspired Ben's fantastic slide guitar work and the Beatles are
always an obvious choice when it comes to most loved bands. However, I
must admit that I was not familiar with First Aid Kit. Thank you for
turning me on to something I hadn't heard before. (Bye the way, this
month's Podcast guest Anna Carow often uses
Ben's slide guitar work when playing live.)

Law Clerk, Katherine West, says
that when it comes to eating out she loves Mio Vicino in Santa
Clara, Fontina Ristorante in Pleasanton
and Campo di Bocce in
Pleasanton (a fun place to actually play Bocce Ball). I'm guessing she's
also a fan of the Godfather, Goodfellas and The Sopranos. Pass the pasta
Ms. West.

Speaking of genre movies, Law
Clerk (and self-proclaimed cinephile) Will Dugoni says he
loves watching Gladiator, 300 and The Lord of the Rings: The Two
Towers. Glad to see he was specific with his LOTR film choice,
and if anyone out there wants to be Will's Valentine he'd love a pair of
sandals or a sword.

As for me, I love
television. I couldn't go on living without Breaking Bad and The Walking Dead, but my
true love will always be Lost (even if the ending
left a little to be desired).

06/07/2012

Hosted by TraMaí Entertainment it's the 3rd Annual California Music Industry Summit(CMIS) at The Hilton Hotel in Oakland on June 8 –9, 2012. Beginning with the conference Kickoff TONIGHT @ The Stork Club 2330 Telegraph Avenue, Oakland, CA 6pm-9pm.

Jeff and Mark will be hosting two informative lectures for music industry professionals. On Friday at 2:45 PMARC Law Group Presents: Music Copyright and at 11:00 AM Saturday morning it's ARC Law Group Presents: The Recording Contract.

If you have any questions about either program feel free to email us at info@arclg.com.

01/16/2012

Join ARC Law Group at Hotel Utah on Tuesday, January 17th at 8PM as San Francisco welcomes the Jeff Michaels Band to the Bay Area!

The Jeff Michaels Band is described as "…a blend of fascinating energy and melodic piano pop-rock..." ~ Caroline Leonardo, Evolution of Media

What: Jeff Michaels Band

Where: Hotel Utah, San Francisco

When: Tuesday, January 17th @ 8PM

Jeff and the band are in San Francisco to putting the finishing touches on their new album. Jeff also took time out of his busy schedule to chat with ARC Law Group'sTraci Holian for an upcoming podcast.

Information about the show and the upcoming Jeff Michaels Band tour can be found here.

Join ARC Law Group partner, Mark A. Pearson on February 4th for this fun and informative event:

CALIFORNIA LAWYERS FOR THE ARTS PRESENTS

THE 29TH ANNUAL MUSIC BUSINESS SEMINAR

CLA is proud to announce the speakers for this year's Music Business Seminar which include Key Note Speaker Erik Metzger from Intel, as well as other industry's leaders from Google Music, Rhapsody, Pandora and more!

11/14/2011

ARC Law Group favorite, Fishtank Ensemble, just released their latest music video for the song "Woman in Sin".

Check it out...

Fishtank Ensemble are the leaders in high-energy, cross-pollinated gypsy music. From California, they bring their unique blend of Romanian, Gypsy jazz, Flamenco, Balkan, Turkish and Tango influenced music to the world.

10/16/2011

Meet and greet some of the top Bay Area music industry professionals tomorrow night as they network and share stories of their professional trials, tribulations, and triumphs at the 4th Annual SFSU Music Industry Career Planning Day.

ARC Law Group's Mark A. Pearson will be on hand for a moderated panel discussion with some of the Bay Area's best, including:

California Music Industry Summit Happy Hour Mixer

Thursday April 28, 2011 5pm - 8pm

"MEET THE SPEAKERS" and CMIS STAFF!

Join Mark & Anne and the CMIS Staff and get the chance to network informally with your peers in the music industry, and meet some of the speakers for CMIS 2011. For a current list of CMIS speakers. Make sure to bring business cards, and enjoy cocktails! Delicious appetizers are on CMIS!

02/18/2011

The following article will try and explain some of the pros and cons of entering into a licensing agreement in today’s entertainment industry.

Recently, we were approached here at ARC Law Group by a client wondering if she could terminate a licensing agreement she’d entered into without any penalty (i.e. without getting involved in litigation). My first reaction was to grab a copy of her license and look for the stated ‘term’, or duration of the license. Unfortunately, the license was silent as to the term. Why, you might ask, was there no stated duration? Well, the license was oral. It turns out the parties had been working on a hand-shake agreement for years.

I suppose I should start by letting you know that you should always strive to get your agreement in writing, and in most cases there should be a stated duration. Seems rather a basic idea, but often because of the nature of the parties involved and their relationships there is no written agreement. It happens.

Here are two examples of a situation where you might find Intellectual property, namely copyright rights, being licensed without a written agreement. Two friends, one a producer and the other a singer, get together in the studio to record a few songs. The producer brings with him a bunch of pre-recorded tracks he had put together several years earlier. The singer records some new vocals. The producer mixes the vocals with the tracks, and we have ourselves a new master recording. There was no written agreement between the parties, but rather a handshake agreement that the singer could ‘own’ the new master recording. Thus, the producer has licensed his tracks to the singer under an oral agreement. I should also mention that all of this happened in California.

The second example comes where two parties, a record label and a distributor, enter into discussions to release an album. The parties, both based in Illinois, haven’t reached a formal agreement but decide to go ahead and get the album out in time for the Christmas season. Subsequently, the parties never come to a formal agreement as there were ongoing disagreements on several terms. However, the album was released under direction of both parties, and thus an agreement was formed.

The first question is whether these agreements are, in fact, binding and legally enforceable. Under U.S. Copyright Law, "A transfer of copyright ownership, other than one by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent." 17 U.S.C. § 204(a). This is the old Statute of Frauds concept, and seems to suggest the oral agreements in the examples, above, would be unenforceable. However, almost across the board courts have ruled that oral or implied transfers of copyright ownership create a non-exclusive transfer of ownership. These non-exclusive transfers can be made without a written agreement and, most importantly, do not violate the Copyright Act. Walthal v. Rusk, 172 F.3d 481, 1999 U.S. App. LEXIS 5455 (7th Cir. 1999), I.A.E., Inc. v. Shaver, 74 F.3d 768 (7th Cir. 1996).

Therefore, in both examples, above, the oral transfer of copyright rights created an implied non-exclusive license. It’s important to note the nature of non-exclusive licenses by pointing out that the producer in the first example could go ahead and use the tracks (i.e. license them to third parties) without getting the singer’s permission. This non-exclusive license created by the oral and implied agreement opens up a huge can of worms, and is a glaring example of why you should always seek to “get it in writing”.

Remember our client wanted to know if she could terminate her oral agreement without penalty. The next question is: When can oral or implied licenses, or even ones that simply have no stated duration, be terminated?

There are several possible ways to terminate an oral or implied license. The parties can simply agree to terminate the license. This can be done by agreeing to an end date during the negotiations stage: In the second example, above, let’s say the parties had agreed that the distribution license was to last for three years, and had email messages supporting this point. It would then be arguable that the agreement duration was agreed upon as being three years. Termination can also be accomplished by agreeing to modify the oral or implied license at a later time: The parties agree that their relationship is not fruitful after six months, and agree in both words and performance to terminate the agreement.

Termination by agreement would also work where a written license states a termination date (i.e. language in the agreement stating, “This term of this agreement shall be perpetual” or “This agreement shall last for three (3) years from the date first stated above”, etc.), or the parties agree in writing at a future date to terminate earlier or later. Note that an oral agreement can amend a written agreement, thus it becomes important to always include a clause in your written agreements stating that the agreement cannot be modified except by an amendment executed by the parties.

Sometimes, termination can be implied by the conduct of the parties involved. The label never sends any materials to the distributor for use in manufacturing the album, and the distributor never raises an objection.

What happens, though, if the license is silent as to the duration? Most states have laws making any agreement that is silent as to duration terminable at-will whether written, oral or implied. This is the case here in California, where absent language or a showing of an agreed upon duration, a contract can be terminated by either party. Zimco Restaurants, Inc. v. Bartenders and Culinary Workers' Union, Local 340, 165 Cal. App. 2d 235, 331 P.2d 789, 792-92 (Cal. Ct. App. 1958). So, it appears that, in both examples, that the parties could just terminate the agreement by simply putting the other party on notice that they had elected to terminate.

Not so fast.

In 1993, the Ninth Circuit in Rano v. Sipa ruled that under § 203 of the Copyright Act, non-exclusive licensing agreements silent as to duration are not terminable at-will from the moment of creation; instead, they are terminable at the will of the author only during a five year period beginning at the end of 35 years from the date of execution of the license (unless they explicitly specify an earlier termination date). 17 U.S.C.S. § 203(a). Rano v. Sipa Press, 987 F.2d 580 (1993). For background purposes, under § 203 of the Copyright Act the copyright holder who has assigned or licensed their rights to a third party can reclaim their rights after 35 years as an operation of law. § 203 applies to exclusive and non-exclusive transfers, and the only time it does not come into play is when the subject of the copyright was made as a Work For Hire. .

The bottom line is that the Ninth Circuit’s ruling means that in California, any state law regarding at-will termination of agreements silent on duration is trumped by federal law where the subject of the license is copyright transfers. Thus the parties in the first example would not be able to terminate the license unilaterally until 35 years after the agreement was created. Let’s say the singer never really did much with the master recording, but Dr. Dre heard the track and wanted to license it from the producer. Obviously, the good Dr. would want an exclusive license on the track, which wouldn’t be available since the singer has a valid, oral, non-exclusive license that the producer couldn’t cancel. I’m guessing the singer is going to get paid to get those rights back. I’m also guessing the producer now wishes he had a written agreement.

Just so you are aware, there is plenty of debate on the Rano ruling. Several jurisdictions have criticized Rano, and the Seventh Circuit rejected Rano; ruling that Illinois state laws allowing for at-will termination of non-durational copyright licenses are valid. Walthal v. Rusk, 172 F.3d 481 (1999). In the second example, the record label, realizing their oral agreement with the distributor was not favorable and that the planned written agreement wasn’t going to happen, could simply terminate unilaterally by giving the distributor notice that the agreement was rescinded. Again, check your facts, because some jurisdictions hold that when an agreement does not contain an express statement as to duration, the court should determine the intent of the parties by examining the surrounding circumstances and by reasonably construing the agreement as a whole in determining the issue of duration. Sensormatic Sec. Corp. v. Sensormatic Elecs. Corp., 249 F. Supp. 2d 703, (D. Md. 2003). It is also the case in California that the general rule increasingly has given way to courts' willingness to "gap fill" a reasonable duration. Foley v. Interactive Data Corp., 47 Cal. 3d 654, 765 P.2d 373, 385-86, 254 Cal. Rptr. 211 (Cal. 1988). The question in our second example then becomes whether the parties have acted in a way that would lead a court to determine a reasonable duration, or have inferred duration by some other means.

A final way of allowing a party to unilaterally rescind a contract regardless of there being a stated, implied or written duration is when the other party materially breaches the contract. Under well-settled copyright law, a party would be able to claim copyright infringement if the other party exceeded the scope of the licensing agreement, see, e.g., S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081 (1989), breached a covenant or condition, see, e.g., Fantastic Fakes, Inc. v. Pickwick International, Inc., 661 F.2d 479 (1981), or breached the agreement in such a substantial and material way as to justify rescission. See e.g., Affiliated Hosp. Prod. Inc. v. Merdel Game Mfg. Co., 513 F.2d 1183, 1186 (2d Cir. 1975). Thus, if the distributor in the second example fails to pay the label, the label could terminate based on a material breach of the contract.

At the end, or termination, of the day you always want to “get it in writing”, but if you don’t and you end up wanting to rescind (or wanting to stop the other party from rescinding), you need to be aware of the laws in your particular jurisdiction. It might not be as simple to terminate a licensing agreement as your standard, blanket, terminable at-will state law might lead you to believe. Oh yeah, it goes without saying, you might also want to avoid breaching your agreements, as a rule.

You understand and agree that use of this blog does not in any way create or establish an attorney-client relationship between you and any ARC Law Group attorney. You should recognize that the information provided on this blog is provided for your general information and should not be relied on as legal advice and is not a substitute for direct consultation with an attorney about a specific legal problem.

02/11/2011

The following article will try and explain some of the pros and cons of entering into a licensing agreement in today’s entertainment industry.

There are a number of different types of licensing agreements that come across my desk in a typical work week. Some are short-form agreements, and others spell out every detail of the parties’ intentions over 50 pages or more. One thing they all have in common; boilerplate provisions. You know; the stuff that gets jammed into the last few pages of the license under the heading Miscellaneous. Well, I’m here to remind you that while they may not be the sexiest part of a license, boilerplate provisions can solidify a good license or create possible pitfalls in a bad one.

We focus, now, on an important boilerplate provision known as the Indemnity Clause. An Indemnity or Indemnification Clause is a provision in which one or both parties to the license agree to hold-harmless the indemnified party from liability to a third party for loss or damage resulting from such liability.

As we discussed in Agreeing to License: Free to Roll With The Changes, there is a trend in the entertainment industry toward licensing intellectual property rights. Music and motion pictures licensed for distribution would be an example. Inherent in the licensing of intellectual property is a fear on the part of the licensee that a third party’s rights may be violated by the licensor’s work. For example: Two musicians write a composition together and record a master of the song. Musician A, a rather shady character, licenses the exclusive right to distribute the master to Distributor. Distributor distributes the master and pays royalties and advances to Musician A. Meanwhile, Musician B, who owns all rights to the master, knows nothing about the agreement between Musician A and Distributor. When Musician B finds out about the agreement she sues both the Distributor and Musician A jointly and severally for copyright infringement and to recover monies earned under the license.

In the example, a solid indemnity clause in the agreement with Musician A would protect the Distributor from liability stemming from Musician B’s rights in the master. Without an indemnification Clause, or with a poorly worded and thus unenforceable Clause, Distributor might be liable to Musician B for big bucks!

A good Indemnification Clause starts with setting forth a clear intention to indemnify. You should start the clause by stating the intention of the parties to provide indemnity. Next, set forth the indemnitor and indemnitee. The indemnification may or may not be unilateral. If there is a third party involved in the indemnification (an insurance provider for instance), make sure they are included. The clause must state that the indemnitee need notify the indemnitor of a claim or lawsuit in a timely manner, and how long the indemnification will last. Will indemnity survive the termination of the license and for how long? Finally, always include a clear statement on the losses, damages and liabilities covered, including whether or not future losses are covered.

You cannot draft an Indemnification Clause without understanding what can and cannot be indemnified. First and foremost, the indemnification must be as against liability to a third party. Public policy dictates that an Indemnification Clause is not enforceable if it seeks to indemnify against illegal activity, wrongful acts or a breach of a fiduciary duty. In the example listed above, you might make an argument that the Distributor was negligent in not discovering Musician B. In some jurisdictions negligence might void the Indemnification Clause. Other jurisdictions make a distinction between active and passive negligence, allowing for indemnification if the negligence was passive. Arguably, the Distributor not discovering Musician B is passive negligence, if negligence at all. The important thing to remember is; if the Indemnification Clause is clear and knowingly bargained for, it is more likely to be enforceable even if it covers negligent acts. A simple way of making it apparent that the Indemnification Clause was knowingly bargained for is to put it under its own heading. Get it out of the Miscellaneous bin.

Once you’ve established a clear definition of whom and what is being indemnified, here are some other things to think about when drafting your clause. It’s implied that the indemnification covers legal costs and attorney’s fees, but it never hurts to make sure you expressly set forth language covering those costs and fees.

A big issue revolves around the issue of consent to settle. If you are an indemnitor you want to make sure you have approval over any settlement that the indemnitee enters into. Going back to our example, imagine if Musician A had the legal right to enter into the agreement with the Distributor, but Musician B filed the lawsuit anyhow. Distributor could simply settle with Musician B to avoid the hassle, and send the bill to Musician A. Now, imagine if Musicians C, D, E & F also came forward and filed claims against the Distributor, who in turn settles with all of them. Ouch! On this same note, Indemnitors may also want to participate in the indemnitee’s defense, including selection or approval of the attorney.

Finally, you’re going to want to think about how the Indemnitee is going to be paid in the event of a lawsuit or settlement. Will the Indemnitee be able to withhold payment under the license in order to pay for the cost of defending? Back to the example; under their license, Distributor is paying a royalty to Musician A on the master Distributor is exploiting. Musician B sues, and Distributor notifies Musician A that it is seeking indemnity under the agreement, and will be withholding payment of royalties to pay for its legal defense. Here at ARC LAW GROUP we’ve seen instances where the indemnification clause called for a bond to be established upon commencement of a lawsuit, or where the indemnitee is able to call for advance payment from the indemnitor to cover all legal fees. If you are the indemnitor, you’d prefer that no payment be made until after final adjudication of any claim or lawsuit. Whatever the parties agree upon, make sure your Indemnification Clause clearly covers this issue. Do not remain silent!

You understand and agree that use of this blog does not in any way create or establish an attorney-client relationship between you and any ARC Law Group attorney. You should recognize that the information provided on this blog is provided for your general information and should not be relied on as legal advice and is not a substitute for direct consultation with an attorney about a specific legal problem.

Lawsuits and controversy aside, we’ll probably never see sampled albums as they were back in the mid-1980s, but that doesn’t mean that sampling is gone. It’s often harder to recognize sampling. Sometimes the sample just doesn’t fit the traditional hip-hop model, and sometimes the sample is so technologically manipulated that it’s unrecognizable.

To illustrate, ARC Law Group was recently approached by the owners of a record label specializing in a cappella recordings. They were working with a group that had covered a popular song from the band Journey, but had made the creative decision to include one line from a separate Journey penned tune at the end of the recording. The record label wanted to know if they had to clear the rights for the one line. The simple answer is: Yes. Even though we usually associate sampling with the Sound Recording copyright, here, we are dealing with a "sample" of the Composition copyright.

Many artists and record labels are familiar with the concept of the Compulsory Mechanical License for composition rights. Simply put, the Copyright Act allows you to record a new version of a previously distributed musical work without obtaining permission from the copyright holder of that original work. There are some important factors on exactly how this compulsory license works (i.e. the new work cannot change the basic melody or fundamental character of the original work), and there are requirements that the new work obtain the compulsory license before distributing the new work (done through Harry Fox Agency), which you should be aware of before releasing your cover song. It’s also important to note that the Copyright Act requires that the creator of the new work pay the owner of the rights to the original work a statutory royalty on each copy they sell of the new work. Currently, that royalty is set at 9.5 cents per copy.

In the case of the a cappella Journey song, as with all samples, the use of one line would not qualify for the compulsory license as the “sampled” line is considered a change in the basic fundamental character of the original work.

If you can’t utilize the compulsory license, then you MUST be granted the rights to use your sample from the copyright holder of the original work. Thus, our record label friends had to contact the rights holder in the Journey song and negotiate the rights and royalty rate.

As you might guess, there are instances with samples where the original rights holder either (a) doesn’t want to allow their work to be sampled; or (b) wants far more that 9.5 cents per copy. Plus, a record label would potentially have to pay an attorney to negotiate those rights.

Some have argued in favor of a compulsory system for samples, but that has yet to happen. Those against the compulsory system for sampling argue, in part, that it might damage the viability of the original work. Even if a compulsory system were put in place, it would still be cost probative to do an album like Paul’s Boutique, where there were several thousand samples used. Even if the royalty rate were set at 1 or 2 cents per sample, a single song like Hey Ladies might rack up 40 or 50 cents per copy sold. At 99 cents per track for a download, anyone who understands how artists are paid (based on net profits) realizes that taking 50 cents per track for sampling costs would leave the artist with next to nothing (if not in the red).

The bottom line is that while it will never be 1986 again, the concept of sampling is still a big part of the music business and it is important to understand that any sample must be cleared with the copyright holder of the original work, and is not subject to any compulsory licensing. So, if you think you might be using something that would be considered a sample on your record, you’d be well advised to chat with an attorney first.

You understand and agree that use of this blog does not in any way create or establish an attorney-client relationship between you and any ARC Law Group attorney. You should recognize that the information provided on this blog is provided for your general information and should not be relied on as legal advice and is not a substitute for direct consultation with an attorney about a specific legal problem.

02/04/2011

The following article will try and explain the recent trends, as well as, some of the pros and cons of entering into a licensing agreement in today’s entertainment industry.

As the various business models of the entertainment industry continue to reinvent themselves almost on a daily basis, one prevailing trend is the growing use of licensing. More entertainment product is now self-produced by artists than ever before. The “Studio System” and “Major Label” business models are quickly becoming obsolete. It’s beyond the scope of this article to make any grand sweeping speculation as to why the industry models are changing. Are these changes the result of the economy, backlash against the ‘old systems’, or technology changes? The answer probably lies somewhere in the murky gray area known as “a combination of all of the above”. The point is that change is here, and change means an influx in the use of licensing throughout the entrainment industry as the shift continues toward independent production.

Take the music industry, for example. Under the old model, record labels hired talent evaluators to find artists, signed those artists to a recording contract, paid for the artist to record an album, created and distributed the album, and then profited off the sale of the album. The label owned the copyright to master recordings that made up the album, and shared in the copyright of the song publishing with the songwriter. The artist made money off of royalties paid by the label (including their advance) based on sales of the album, and on royalties paid to the songwriter by a performing rights organization (ASCAP/BMI) for broadcast of the song.

Today, the notion of a record label signing an artist and developing that artist from scratch is virtually a foreign concept. Instead, the trend is for artists to do all the legwork themselves and self-record their masters, or for the artist to work with small labels and split the costs associated with recording the masters. Recording being the easy part, the tough job is getting the masters out to the public: Distribution. This is where licensing comes into play.

One trend we see here at ARC Law Group is for new artists to license their masters to a small independent record label, either after they’ve self-recorded or in connection with the independent label’s efforts to help them record. The independent label then sets up digital and physical distribution outlets, helps with marketing and promotion, and books gigs for the artist. If the artist generates buzz, or the independent label has a strong niche, then perhaps the masters might be re-licensed to a major label at some point.

How does the artist get paid? The artist gets paid a licensing fee by the label in exchange for the right to distribute the masters. The licensing fee may include upfront money, royalties, advances, etc. An artist has more control now, too. Contrary to the old system, the artist now owns the copyright to the masters. They can license the rights to their masters for less than, say, eternity. The advantage is simple; the artist can renegotiate the licensing fee after a few years and isn’t locked into a long-term deal that is economically or creatively disadvantageous. The artist also controls the type of license being offered, exclusive or non-exclusive. By example, the artist grants a license only for physical distribution to an independent label, while holding on to the rights to license the masters for use in movies, TV or commercials (synchronization rights), or for any other use or other form of distribution.

This pattern of licensing is not exclusive to the recording industry. I’m reminded of one of my former client’s; a film production company, which just finished negotiating an agreement to license the rights to their independent film to a direct-to-video distributor. This illustrates the trend in the motion picture industry to produce privately financed, independent films (generated without studio funding) specifically with licensing in mind. These independent films are shopped at film festivals, or to direct to video distributors. Any number of reasons might lead a filmmaker down the independent path including creative control, money, and studio-system roadblocks, to name a few. Ultimately, if the filmmaker finds an outlet, different licensing agreements would be generated to cover the rights a distributor wanted to exploit: theatrical release, DVD, internet distribution, film clips, etc.

This same independent-minded trend toward licensing can be found in book publishing, the internet, photography and all other areas of the entertainment industry.

Now that we’ve covered the basics on why licensing has become such an important part of the general landscape of today’s entertainment industry, our next challenge will be unlocking some of the secrets to understanding the fundamental terms of these types of agreements. Over the next few months you’ll see articles here on B.E.S.T. Blog that will address some of the specifics of licensing and we’ll also get technical; looking at the language used to craft licensing agreements and explaining why certain clauses and provisions are important.

You understand and agree that use of this blog does not in any way create or establish an attorney-client relationship between you and any ARC Law Group attorney. You should recognize that the information provided on this blog is provided for your general information and should not be relied on as legal advice and is not a substitute for direct consultation with an attorney about a specific legal problem.

02/01/2011

Here at ARC Law Group we are often asked to shop music, film and book projects. Well, here's the reality behind "shopping"...

Record labels, Film & TV Studios and Book Publishers never accept UNSOLICITED demo, script or manuscript submissions. This includes submissions sent from the artist directly, or from an attorney or agent.

If an UNSOLICITED submission is made, it will be returned unopened or simply tossed in the circular file.

Most lawyers that practice entertainment law DO NOT "shop" demos, scripts or manuscripts; we only "submit" them.

Thus, it's up to you to connect with someone with authority at a label, production house or publisher (i.e. an A&R rep), who is willing to accept your submission (This would NOT include secretaries, receptionists and/or admins).

Take down their name, address & phone number, email and any other pertinent information (i.e. their preferred method of delivery).

Here's the rub...

Once you've got the necessary contact info then you need to hire an entertainment lawyer to submit the demo, script or manuscript on your behalf. Why? Believe it or not, labels, studios and publishers require submissions to be made by an attorney or agent; despite your having secured the contact. (It has a lot to do with separating business from emotion).

Here at ARC Law Group we are happy to submit your materials once you've made a solid contact. We believe in your project and, while we can't gurantee any particular outcome, we will zealously advocate on your behalf!

If you've made a connection and have a project you'd like us to submit, contact us at info@arclg.com.

You understand and agree that use of this blog does not in any way create or establish an attorney-client relationship between you and any ARC Law Group attorney. You should recognize that the information provided on this blog is provided for your general information and should not be relied on as legal advice and is not a substitute for direct consultation with an attorney about a specific legal problem.